As a tax resident of an EU country who files my own returns, today is my quarterly 'Tax Day'. On this day I set aside a few hours to file social security reports, my quarterly VAT return, and review the previous quarter to make sure I have not forgotten to declare anything.

But today is not about personal income tax. It is about something more interesting: startup taxes.

Estonia's tax system is very simple and has one huge advantage: retained earnings are not taxed. That alone is a big deal.

Now a theoretical case.

Given:

1. A Portuguese tax resident with NHR status (which gives substantial tax breaks; without NHR it is scary to even calculate).

2. An Estonian company (OÜ).

3. Company profit available for distribution: €50,000 per year (one can dream...).

4. The founder formally has a minimal salary from the company: €12,000 per year (this is critical; without any salary, when distributing dividends the Estonian tax office may treat the dividends entirely as salary).

The sad tax math:

1. Income tax (~20%): €2,400

2. Other withholdings (~2%): €240

3. Social tax (~11%): €1,320

Net salary: €12,000 − €3,960 = €8,040

That leaves €38,000 to distribute as dividends:

1. Corporate tax in Estonia (22/78 ≈ 28.21%): €10,720

2. Dividend tax in Portugal: €0 (thanks to NHR; without it, about 28% or €7,640)

Net dividends: €27,280 (without NHR: €19,640)

Total in the founder's pocket: €35,320 (an effective tax rate of about 29–30%).

€14,680 just evaporate. You could also add the cost of an Estonian company accountant (for this turnover, around €1,500–2,000), but I will not.

Conclusion: There is no conclusion.